Sunday, February 28, 2010

This author of this article, Larry McDonald, points out that a certain economic phenomenon known as an "inverted yield curve" signals recession. Right now, the curve goes the opposite way, indicating recovery. In fact, he points out, the ratio of 2-year to the 10-year treasury yield is at a historical high. Wow! Should be a gangbusters economy this year, right?

He then seems to scratch his head at this strange phenomenon: Banks are not lending. Despite being able to borrow cheap and lend high, they are not lending. Commercial lending has contracted 10% over the last 12 months. The previous record (since the 70s) for such a contraction is 2% in the 1990s.

The yield curve does not explain this. The author scratches his head and wonders how this can be. Why are banks refusing to make a profit?

To which I reply: Duh! It's because a lot of people have been making war on profit, promising to punish wealth-builders (the "evil rich"), vigorously attacking the incentive to earn.

As I have said before, the most convincing argument I have ever heard to explain what ended the Great Depression was that FDR finally stopped waging war on profit and started waging war on Nazis. It's all there in his speeches. He scared wealth-builders into seclusion until 1940 when he called a truce to get them to build warships and tanks. It makes no sense to say that borrowing tons of money to build things that you are planning to blow up is somehow an increase in "production". If wartime was so productive, why were people rationing every staple in sight? Ultimately, war is destructive -- literally so.

What you'll never get Paul Krugman and his crowd to admit is that the people's incentive to earn is essential to economic recovery. Guess who is at war on wealth-builders today? Just as FDR unwittingly and ineptly prolonged the Depression, so Obama keeps this economy depressed. That's my theory, at least.

Friday, Senate Democrats tried to pass a bunch of spending by unanimous consent and the only Senator to put a stop to it was Sen. Bunning. Only one nay was required to stop it from being unanimous. Democrats can still pass these bills, they just have to go through a normal Senate vote and explain to the American people why they are increasing the size of the Federal gov't and the national debt (the proposed spending was not "paid for" by taxes or other spending cuts).

This pissed off the Dems to no end and they berated him hour after hour. Senator Durbin told Bunning, "It is simply unfair for one senator to attempt to hold the Senate hostage on this issue." From his seat the Senator muttered, "Tough sh*t".

I love it.

Senator Bunning used to pitch in the major leagues. In 1964, he pitched a "perfect game" -- the first perfect game in the National League in 84 years. The definition of a perfect game is when, one after one, the opposition sends a batter to the plate and the pitcher sends him back to the dugout: no hits, no walks, no hit batsmen. When Phillie pitcher Bunning defeated all those New York Mets, 27 up-27 down, I'm sure they were frustrated. However, none of them whined about how "unfair" it was to not even allow at least one of them to get on base, or that it was unfair for one player to frustrate the will of so many other players.